Inflation in the UK has fallen to its lowest level in two years

UK inflation unexpectedly fell to 1.7% in September, reaching its lowest level since April 2021.

This is significantly lower than the forecast of analysts, who expected growth of 1.9%, and indicates a slowdown in price growth. Inflation has hovered around this level for the past four months and stood at 2.2% in August.

Core inflation, which does not include the cost of food, alcohol, tobacco and energy, fell from 3.6% in August to 3.2% in September.

Also in September, the growth rate of retail prices (RPI index) slowed to 2.7% year-on-year, compared with 3.5% in August. It is important to note that this is the RPI index used by British employers when discussing salaries.

The difference in the dynamics of the RPI and CPI indices is explained by the following factors: RPI includes housing costs, while CPI does not take them into account. In addition, RPI assigns different weights to air fares, insurance, and gasoline prices compared to CPI.

A similar trend is observed in the eurozone, where inflation also fell to 1.8%, falling below the European Central Bank's 2% target.